On March 22, 2018 the 2018 Alberta Budget was released. There were no tax changes mentioned in the new budget, however, there were a bunch of other measures that were proposed – below you will find our key takeaways.
The Minister states that the government will focus to eliminate waste and control spending, however, there will be deficits and the budget is not expected to be balanced until 2023/24 by which time total debt is estimated to be $96B (20 years after Premier Ralph Klein held up a sign that said “Paid in Full”). There is a projected deficit of $8.8B for 2017/18 with total debt set to reach $54B.
Another scary fact: by 2024, Alberta will have total debt that is expected to reach $96B.
In looking at the other provinces in Canada that have released their 2018-2019 budgets Alberta has the largest deficit of all:
Surplus / (Deficit)
Currently Alberta has the lowest Net Debt to GDP of all the provinces. Net Debt is the amount of debt less any investment assets that the province has. As the debt levels continue to rise, Budget 2018 proposes that Alberta’s Net Debt to GDP will peak at 13.1% and will remain the lowest in Canada. A higher debt load requires additional revenue each year to cover the costs of the debt.
Building a Better Alberta
The government is planning to spend $30 Billion on new capital projects in Alberta. The Budget 2018 Capital Plan outlined:
- $4.6 billion over five years for health infrastructure including the new Edmonton hospital and Calgary Cancer Centre.
- $2.2 billion over five years for schools that support student learning and well‑being and address community needs.
- $2.1 billion for climate change and environmental sustainability. This includes $83 million to make sure First Nations communities in Alberta have the infrastructure necessary to bring safe, clean, reliable drinking water to people.
- $6.9 billion over five years for municipalities, including $0.9 billion for light rail transit. $3 billion is being committed over the next ten years for light rail transit in Edmonton and Calgary.
- $3.3 billion for roads and bridges to improve the flow of goods and services throughout the province and make roads safer for Albertans.
- $5.4 billion for capital maintenance and renewal to ensure public facilities continue to serve the needs of Albertans.
Alberta continues to be the lowest taxed province in Canada, according to the provincial government. The Budget 2018 states that the next lowest taxed province is BC, and if tax rates were similar to BC then the province would generate an additional $11.2B annually in additional revenue. Alberta is the only province in Canada that has not yet implemented a provincial sales tax.
On Jan 1, 2018 carbon taxes increased to $30/tonne and will continue to increase to $50/tonne by 2021. The current budget has been based on oil prices averaging between $59 – $61/barrel, with an expected GDP growth of 2.7% (after 4.5% in 2017) and an unemployment rate of 6.8% (down from the 2016 peak of 8.1%).
In order to meet the proposals put forth in Budget 2018 the government needs to ensure that additional pipelines are completed. Without increased capacity, the government won’t be able to increase the provinces revenues and the government won’t be able to balance the budget in 2024.
Budget 2018 also depends on the price of oil. The current proposals are based on oil prices remaining in the $59 – $61 range. If the oil prices increase above this amount the proposed deficits should be reduced and the government should be able to be balanced sooner. If the oil prices drop below the estimated $59 then the deficits will increase and the Net Debt to GDP will also increase.
Investment Tax Credits
The Alberta Investor Tax Credit (AITC) and the Capital Investment Tax Credit (CITC) were first announced during the 2016 Alberta Budget and was supposed to last for two years; it has now been extended until 2021 – 2022.
The CITC is available to corporations and provides a 10% non-refundable tax credit of up to $5 million for a corporation’s eligible capital expenditures on manufacturing, processing and tourism infrastructure.
The AITC provides a 30% tax credit to investors who make equity investments in eligible Alberta businesses doing or engaged in:
- Research, development or commercialization of new technology, new products or new processes
- Interactive digital media development, video post-production, digital animation or tourism.
Investors will also be eligible to receive an additional 5% credit if they invest in corporations that meet specific diversity and inclusion criteria.
The max refundable credit for individuals is $60,000/year. For corporations, the AITC is non-refundable and there is no limit on the credit that can be claimed.
Interactive Digital Media Tax Credit
The Interactive Digital Media Tax Credit has been introduced to provide support for Alberta’s interactive digital media sector. This credit will provide eligible interactive digital media companies with a benefit equal to 25% of eligible labour costs incurred after April 1, 2018.
An additional 5% diversity and inclusion credit enhancement may also be available where the eligible corporation employs workers from under-represented groups.
This program will provide maximum funding of $20 million/year.
Alberta Child Benefit (ACB)
The benefits provided under the ACB have been increased for the 2018-19 year. As a result the phase-out threshold for the ACB will be increased from a family net income of $41,786 to $42,255.
Families with a net income of up to $26,141 will receive the maximum benefit (up from $25,832 in 2017-18).
Families with one child will be eligible for a maximum annual benefit of $1,128 ($1,114 for 2017-18), with an additional annual benefit of $564 ($557 for 2017-18) for each of the next three children. Families with four or more children will be eligible to receive a maximum annual benefit of $2,820 ($2,785 for 2017-18).
Alberta has agreed to enter into a coordinated framework with the federal government regarding the taxation of cannabis, covering the first two years of legalization. Under this the greater of $1/gram or 10% of the producer price will be collected, with the province receiving 75% of this tax room.
Alberta will be allowed to collect an additional tax of up to 10% of the retail price.
Both federal and provincial duties will be collected. Collection of these amounts will minimize administration costs to the provincial governments and compliance costs to business.